Monday, June 19, 2006

Roll Your Own

At the Front End of Innovation conference in May, Dr. Michael Treacy gave a presentation about academic research that he is conducting into the various forms and methods of innovation in business around the world. One of the items that had been trickling around in the back of my mind has finally taken shape, and that is the concern over a particular “model” of innovation.

Treacy has defined a model with three significant axes – the degree of complexity of the business, the amount of coordination and alignment within the business and the adaptability of the business. His idea is that using these levers, a firm can determine its innovation quotient and begin to improve its ability to innovate. I’m going to argue that firms need to evaluate what others are doing, but craft their own, unique innovation strategy. Dr. Treacy certainly did not advocate adopting innovation models from other firms from the whole cloth, and I felt his presentation was valuable and a good jumping off point for this blog post.

There are three concerns I have with too much adoption of existing innovation models: 1) the historical nature of research, 2) how applicable the learning is to your business, and 3) how differentiated your business is and wants to remain.

First, almost all research is looking in a rear-view mirror, at conditions that existed at some time in the past. Clearly GM was successful in the 50s and 60s, but I would not argue that their business approach and model from that time are necessarily correct for today. Most research also looks at only successful companies and filters out the unsuccessful products or companies that did succeed. Research about innovation, especially firms that have been successful innovating, is important, but the information must be used carefully. All too often, a firm exploited a niche or met a market condition that simply does not exist now, so attempting to duplicate one firm’s approach is dangerous. My concern is true whether we are talking about academic research or what's in books about innovation. Often, looking in hindsight we can piece together facts that make a firm's success look planned rather than happenstance.

Second, there’s an applicability issue. If a lot of research is based on firms that produced new physical products, there’s not as much to learn if your firm is services-based. Even if your firm produces products, there are wide differences between the value chains of consumer packaged goods and electronics for example, and some innovation approaches will simply not translate to another firm or industry. Also, “innovation” has many layers and subtexts. Some firms succeed at incremental innovation, while others are seeking to disrupt a market. Some firms focus on internally driven ideas and R&D, while others are creating an open innovation platform, incorporating customers, vendors and business partners. These different approaches make adopting one firm’s model highly suspect, even if they are in the same industry.

Third, and related somewhat to applicability, is the issue of uniqueness. Are our businesses so similar that we should all follow the same innovation model? It seems to me that senior management needs to set a specific corporate direction and allow the teams in the organization to define the methods and approaches necessary to become more innovative. What’s happening right now in innovation is that CEOs are telling their people “We need to be more innovative” without providing a good definition of what that should mean or how the request ties to strategic goals and directions. CEOs cast about, looking for firms that have been successful with innovation and declare “let’s be more like Apple/P&G/3M” when those business models and approaches don’t readily apply. Meanwhile, the folks in the trenches are trying to decide how to get started, and are upset that the senior management teams can’t provide clear guidance and get out of the way. In some instances – purchasing for example, my purchasing process and yours may match exactly, and that’s OK, I don’t get great value or differentiation around my purchasing process. My innovation process, on the other hand, may be a significant driver of value for me, and I need for it to be tightly aligned to my strategy and differentiated from what others are doing.

I suggest you roll your own innovation strategy. Sure, look at what others have done. Leverage the best practices inventories that are available. Talk to the folks at Peer Insight if you are a services firm. Read the best selling authors. Steal a little bit of insight from a number of sources. Then synthesize all of that knowledge and use it to your advantage.

Start with the senior management team. What’s important to them is next quarter AND next year AND five years from now. Define some incremental innovation goals and tie them to short term measurements. Define some more disruptive innovation goals and measure them on a qualitative basis. Establish a longer time frame for the disruptive goals. Assess the culture of the firm and determine its ability to attempt “open innovation”. By defining the model and approach, you can tie your innovation methods and processes to corporate goals, and get more buy-in from the senior management team, and build processes that tightly align to your business’ specific requirements and needs.

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